Comics could go mass market with Disney-Marvel

<p>Marvel graphic novels sit on the shelf of a bookstore in New York, August 31, 2009. REUTERS/Brendan McDermid</p>

BANGALORE (Reuters) - The wall-crawling superheroes and caped vigilantes of Marvel Comics will soon overrun the streets and take to the skies in the more sedate precincts of the Magic Kingdom.

That might not be a bad thing for comic books.

The $4 billion acquisition of Marvel Entertainment Inc MVL.N by media giant Walt Disney Co (DIS.N) announced on August 31 could give the publisher a real shot at expanding its niche comic book business to one that has broad, mass-market appeal.

Marvel’s new parent Disney, with a media empire spanning radio stations, cable networks, theme parks, toys and movie studios, could expand the limited readership and restricted retail network that have kept the industry in check.

Low growth projections at Marvel Comics, whose library of 5,000 characters includes Spider-Man and X-Men, are reflective of the near-stagnant North American comic book industry, of which it has the largest market share.

“The industry still has to make new inroads if it’s to survive -- from distribution right down to the corner comic shop,” said Bob Layton, a writer of Marvel’s Iron Man stories. “I have no doubt that Disney may bring in a different distribution model.”

Disney’s experience with characters and its ability to monetize them are expected to add heft to Marvel’s comic book business. It also brings with it money, a promise of investments and marketing clout.

“A large number of comic shops in America are dingy, poorly managed venues, akin to porn shops,” Layton said. “The comic industry needs easily accessible venues where young people can casually find and purchase comics, either through subsidies or discount incentives.”

Comic book publishers such as Marvel and DC Comics, owned by Time Warner (TWX.N), cater to niche customers, usually teenage boys and older males, through specialty stores that only dedicated fans would visit.

“There is a core group of people that are comic book fans,” Arvind Bhatia, an analyst with Sterne, Agee & Leach, said. “But to expand that and make it more mass market probably is the biggest challenge.”

The primary means of comic book distribution in North America is the direct market, which was worth about $437 million in 2008, according to comic-book researcher Comichron.com. Under the direct market system, distributors and retailers buy comics from publishers under the condition that they cannot return unsold books.

Marvel has more than 40 percent of the market, followed by DC Comics, according to Diamond Comic Distributors, the largest distributor of comic books in the United States.

The comic book segment contributed more than a fourth of the Marvel’s overall revenue in the second quarter. Movies and licensing make up the rest.

‘A QUEST FOR CONTENT’

“I see the Marvel acquisition by Disney helping to expand the genre of comic books and remove it from the dusty basement of the world,” said Sean Creswell, the owner of Capes Comic Book Lounge in Omaha. His shop derives 45 percent of its sales from Marvel.

“I do see Disney stepping in and offering retailers outside of the direct comic book market incentives for selling Marvel products,” Creswell said.

Marvel declined an interview request from Reuters.

“For Marvel, the publishing business has been a nice, steady predictable growth business that contrasted nicely with the vagaries of the film business, which is always a lot more volatile,” Caris & Co analyst David Miller said.

So far, the route to Marvel characters’ gaining mass popularity has been through movies.

“We would expect Disney, because they are a mass marketer, to move it toward more mass market,” said Kelly O‘Keefe, a branding specialist and managing director of the Virginia Commonwealth University Brandcenter.

Over the years, Disney has evolved from a creator of popular characters to a major media and entertainment brand that makes a lot of revenue from licensing.

“It’s all about content,” Bhatia said. “And media companies want to have content. Comic books provide some of that. It’s one of the ways to be in control of content that you can exploit in different ways, whether it’s comic books or movies or toys or video games. It’s a quest for content.”

The Disney-Marvel deal shines a light on comic books, and any kind of spotlight on comics is good for entertainment companies, said Scott Rosenberg, chairman of Platinum Studios PDOS.OB, a comic book publishing and licensing company. “A rising tide raises all ships,” he said.

The risk that a comic publisher runs in going mass market, O‘Keefe said, is that some of the hard-core audience might drift away to look for alternative comics.

“The challenges are that Disney doesn’t take the edge out of Marvel Comics,” O‘Keefe said. “Marvel Comics have been famous for tackling controversial subjects. You don’t want to see the rough edges of Marvel Comics rounded by Disney.”